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Statement by Shivaun Raff, CEO and Co-Founder of Foundem, the lead Complainant in the European Commission’s Google Search case:

We welcome today’s announcement that the European Commission has adopted a Prohibition Decision in the Google Search case.

Although the record-breaking €2.42 billion fine is likely to dominate the headlines, the prohibition of Google’s immensely harmful search manipulation practices is far more important. There can’t have been many Competition cases where the stakes for consumers, businesses, and innovation were any higher.

For well over a decade, Google’s search engine has played a decisive role in determining what most of us read, use and purchase online. Left unchecked, there are few limits to this gatekeeper power. Google can deploy its insidious search manipulation practices to commandeer the lion’s share of traffic and revenues in virtually any online sector of its choosing, quietly crushing competition, innovation, and consumer choice in the process.

Key Points

- The Google Search case is not about Google’s comparison shopping service; it is about Google’s core search results and the illegal practices Google uses to manipulate them.

- For the time being, the Commission has chosen to constrain the scope of its formal charges to Google’s application of these illegal practices as they affect the comparison shopping market—i.e., when Google uses these practices to divert traffic and revenues to its own comparison shopping service (currently called Google Shopping) and away from competing comparison shopping services.

- The Prohibition Decision upholds both halves of Foundem’s November 2009 competition complaint. That is, it concludes that Google has been illegally “favouring” its own services in two ways: first, through Universal Search (which artificially promotes Google’s own specialised services) and second, through anti-competitive penalties (which artificially demote or exclude competing specialised services).

- As has been the case throughout the Commission’s investigation, the Prohibition Decision is not limited to desktop search. It covers all of Google’s search results, regardless of whether they are accessed through a browser or an App, or from a desktop, laptop, tablet, or mobile phone.[1]

- The final remedy is likely to extend beyond comparison shopping to include travel search, local search, and other existing and future specialised services.[2]

Remedies

The Commission has made clear that it intends to pursue a remedy based on the Even-Handed, non-discrimination principle widely endorsed by Complainants and consumer groups. This principle states that Google’s search engine must hold all services, including Google’s own, to exactly the same standards—using exactly the same crawling, indexing, ranking, display, and penalty algorithms. One of the main advantages of a principle-based remedy is that it is resilient to future innovations and developments, as we highlighted in our November 2013 Analysis of Google’s Second Proposals:

“What the even-handed principle would look like in practice would be entirely up to Google. Google would be left free to pursue any and all developments that improve the quality of its search results or enrich or enhance their display. The only difference would be that, under a non-discrimination remedy, the search results afforded these enhancements would be based on their relevance to the users’ query rather than Google’s financial interests.”

As things currently stand, Google has a range of implementation options available to it, falling into two broad categories: one option preserves Universal Search, while finding a way to incorporate competing services alongside Google’s own. The other abandons Universal Search altogether and entrusts the selection and ranking of appropriate specialised services to Google’s core crawling and ranking algorithms (minus anti-competitive penalties). The second option is by far the more straightforward to implement, and could easily replicate all of the functionality and appearance of Universal Search, but in a way that is both pro-competitive and more desirable for users.

Given that the straightforward option relies on Google’s core algorithms (albeit minus the anti-competitive penalties) and on a meta tag schema that Google has already developed, it should be possible for Google to implement such a remedy in a matter of weeks.

The unpalatable truth at the centre of the Google Search case is that, if you are looking to buy something, Google has become increasingly particular about exactly how it wants to connect you to the merchants who sell it. Google increasingly wants to connect you to merchants through paid advertisements or via its own comparison shopping service—either of which generates revenue for Google. But, crucially, Google increasingly does not want to connect you to merchants through relevance-based natural search results or via a competing comparison shopping service—neither of which generates revenue for Google.

It is perhaps not surprising that Google has tended to gloss over this important point. Convincing users that it is in their best interests to forego relevance-based natural search results in favour of pay-for-placement advertisements and artificially promoted links to Google’s own services is a tough sell.

Google introduced its search manipulation practices gradually over time, in a series of virtually imperceptible individual steps (see section 2 of our Response to Google’s November 2016 Statement). As a result, there is now a growing chasm between the enduring public perception of Google’s search engine as comprehensive and unbiased and the reality that, for commercial search terms at least, it is increasingly neither. As Google co-founders Larry Page and Sergey Brin pointed out in 1998, “since it is very difficult even for experts to evaluate search engines, search engine bias is particularly insidious.”

It is also worth noting that, in the two-sided market in which Google operates, Google’s well-worn line about competition being “only a click away” does nothing to mitigate its special responsibilities as an overwhelmingly dominant search engine, but it does underline the unusual extent to which Google’s dominant market position depends on maintaining a trustworthy, even benevolent, public image (see section 7 of our Response to Google’s November 2016 Statement).

Many of Google’s recent public statements have been based on the false premise that the Commission’s antitrust charges are about ads rather than search results and on the false notion that these two things are interchangeable. While ads and search results might look similar, the underlying financial implications for Google, consumers, and businesses are very different.

Given how much of Google’s recent public pushback has hinged on the pay-for-placement model Google now employs within its Universal Search inserts, it is noteworthy that Google only introduced this fundamental change more than two years into the Commission’s formal investigation.[3] And, prior to introducing pay-for-placement, Google had spent more than a decade railing against the many obvious shortcomings of this model for users (see section 5 of our Response to Google’s November 2016 Statement).

Before Google began anti-competitively demoting rival comparison shopping services, these services were an increasingly popular way of shopping online (see sections 4.8 to 4.13 of our Response to Google’s November 2016 Statement). And it’s easy to see why: with just one click on a Google natural search result, users would be taken to their selected comparison shopping service and presented with a comprehensive survey of prices and availability for their chosen product from all or most of the leading online retailers (usually including Amazon and its various Marketplace Merchants). And, with just one more click, users would be delivered directly to the appropriate page on the website of their chosen merchant, from where they could then complete a purchase. In other words, prior to the introduction of Google’s anti-competitive search manipulation practices, consumers were rarely more than two clicks away from buying their chosen product based on a comprehensive survey of the market. By contrast, following the introduction of Google’s anti-competitive practices, consumers are now either several clicks away from a cursory survey of the market (which they must conduct manually themselves) or just one click away from probably paying more than they need to via one of Google’s prominently positioned, pay-for-placement, Google-Shopping-derived advertisements (see section 3 of our Response to Google’s November 2016 Statement).

The crucial role search engines play in directing users to websites means that most Internet-based businesses rely on search engines for a substantial proportion of their traffic and revenues. Google’s overwhelming dominance of horizontal search means that, for most websites, this amounts to an uncomfortable but unavoidable reliance on Google. And, of course, Google’s own specialised services are no less dependent on this Google search traffic than anyone else’s. Moreover, given that Google’s users visit Google for its natural search results and not for its paid advertisements, there is and always has been a symbiotic relationship between the websites that depend on Google for free natural search traffic and the tens of billions of dollars of Google’s annual advertising revenues that depend on these websites—because, without them, Google would have no natural search results to hang its ads on.

Google’s repeated protestations about the flourishing fortunes of Amazon and eBay remain the red herrings they have always been. Put simply, Google does not (yet) have an online retail, auction, or merchant-platform service that competes with Amazon or eBay. Therefore, Google does not (yet) have any incentive to anti-competitively penalise Amazon or eBay in its natural search results, and it does not (yet) have any directly competing service of its own to anti-competitively insert at the top of all potentially relevant search results. For an analysis and rebuttal of Google’s “Search for Harm” and Amazon-based “shopping” arguments, see our interactive reply to Google’s public response to the SO and section 4 of our reply to Google’s public response to the SSO.

The Length of the Investigation

We are often asked whether we would have submitted our European Competition Complaint if we had known how long the process would take or the herculean effort that would be needed to rebut Google’s seemingly endless obfuscatory arguments. In the end, getting to this point required numerous formal submissions, White Papers, panel discussions, Op-Eds, and open letters, as well as countless meetings with regulators, politicians, and journalists across four continents.

The definitive answer to this question might have to wait until the conclusion of our related civil claim in the UK High Court, but we have always known that the process we began and have devoted so much of the last several years to is immensely important. If effective remedies can be devised and enforced, which we believe they can, then it is no stretch to say that the outcome of this case could safeguard the future of competition, innovation, and consumer choice on the Internet.

About Foundem

Foundem is a UK-based vertical search company and the lead Complainant in the European Commission’s Google Search case.

It was Foundem’s November 2009 Competition Complaint[4] that triggered the Commission’s Google Search investigation, and, since then, we have continued to spearhead the global effort to shed light on Google’s anti-competitive search practices and reveal the truth behind the misleading arguments Google has used to defend them.[5]

Although Foundem was the first to raise these issues with the European Commission (and with the U.S. FTC), we have always known that our case was just the tip of a global iceberg. Indeed, over time, more and more companies have come forward, from Europe, the U.S., and elsewhere. Moreover, while there are now an unprecedented number of formal Complainants, there are many more companies that, through fear of retaliation, have only engaged with the Commission informally and/or in confidence.

Foundem provides a compelling example of the innovation-suppressing cost of Google’s anti-competitive search manipulation practices. Our case is not only about a legitimate business being anti-competitively denied access to a level playing field; it is also about an innovative, and potentially revolutionary, technology being denied the opportunity to fulfil its potential.

Our patented, programmable, vertical search technology allowed us to provide best-of-breed vertical search services to virtually any vertical with a fraction of the costs and resources of our competitors. By seamlessly ingesting feeds, crawling websites, and querying APIs and databases, Foundem could deliver unique results that were often more comprehensive and accurate than those of its competitors. Coupled with our innovative product-classification technology, this also allowed Foundem to deliver comparison shopping functionality to niche domains that lay beyond the reach of conventional services.

Google’s illegal search manipulation practices have caused substantial harm to Foundem’s business. And, in June 2012, we launched a civil claim for damages in the UK High Court. Under European Law, the conclusions of Prohibition Decisions are binding on national courts. Due to the substantial overlap between the Commission’s (then) anticipated Prohibition Decision and the Foundem Complaint, evidence, and arguments on which so much of it is based, our civil claim was stayed by mutual consent in December 2015. This stay will be lifted now that the Commission has adopted a Decision.

A Timeline of the Google Search Case

For further information about the background, context, and key turning points of the Google Search investigation, please see our Timeline of Significant Events.

[3] Google introduced a pay-for-placement model within its comparison shopping service and associated Universal Search inserts in the U.S. and Europe in October 2012 and February 2013, respectively. In a pay-for-placement model, the amount a merchant is willing to pay is a determining factor in where its offers are placed. This contrasts with the industry-standard pay-for-inclusion model, where merchants typically pay only to have their offers included in the service’s listings—their placement being determined solely by the user’s search and sort criteria (typically defaulting to cheapest offer first).

[5] For some examples, see our deconstructions of Google’s first, second, and third commitment proposals, our rebuttals of Google’s public responses to the Commission’s SO and SSO, and our proposal and advocacy of the non-discrimination remedy now being sought by the Commission.